seems to us quite as good as the argument that its actual extent implies the practice of insurance. The decisive argument against any existence of insurance in those ages is to be found in the fact that the Roman civil law, which, in its systematic completeness, neglected none of the affairs or transactions of life, is perfectly silent in reference to insurance. We have already said that contracts of bottomry and respondentia were carefully and minutely regulated. It was of the essence of those contracts that, if money was borrowed on the security of ships or cargoes, the lender was permitted to require, and the borrower permitted to contract for, a far larger interest than would otherwise be allowed, provided it was a part of the contract that, if the ship or cargo was lost by a peril of the sea, the lender should make no demand on the borrower for any part of the debt, principal or interest. Here the lender takes upon himself the risk of the loss of the property, and is paid for this risk by the increased interest. It is so far of the nature of insurance. It would seem impossible that contracts of this kind should be recognized as frequent in practice, and regulated by careful provisions of law, and yet that the contract of direct insurance should also exist in practice, and be wholly passed over and ignored by the law.

It is equally impossible to believe that such a practice as that. of maritime insurance should ever exist, and pass wholly away, not only out of use, but out of knowledge. But there are no traces of it in the centuries of the decline and destruction of the Roman empire, until we come far down in mediæval ages. Nor can we doubt that the common impression is just, which regards insurance as an invention of merchants and ship-owners engaged in the commerce of the Mediterranean, somewhere in the twelfth century.

Almost contemporary with this invention, and made by persons engaged in the same commerce, was that other invention. of negotiable bills of exchange. Nor is it too much to say, that these two inventions have made possible the enormous and growing commerce of this age. In another work I have considered more fully than would here be proper the effect of this last invention as an instrument of commerce. Here it is enough to say, that the commerce of earlier ages had been made possible by the invention of coined money, which thus became the representative of all

value, and was itself a medium of exchange of all property. In those distant ages when money was unknown, barter was necessarily the only means of commerce, and it imposed upon this commerce the narrowest limitations. But when money was invented, a substance which occupied a comparatively small space, and was movable with great ease, it opened these limits at once, and made an extensive commerce possible. And it may perhaps be supposed that the commerce of the ancient world attained all the development and magnitude which were possible, when all goods sold must be paid for with money, and vast amounts of this instrument of exchange must be kept on hand, or shifted from place to place, as the necessities of commerce required. But these limits, wide as they were in comparison with the narrow possibilities of a commerce by mere barter, if indeed that should be called commerce, were again widened, and in far greater proportion, by the invention and use of negotiable paper. For this was a method of coining credit. And the strips of paper which thus bore the whole accumulated credit of all whose names were on them became at once the representative of money, or the representative of that which was itself the representative of all value. By this means the value of the largest cargo might be transmitted across the world, within the envelope of a letter, and this in a form secured from loss by accident or design. A brief consideration of the extent of the present commerce of the world, within nearly all civilized nations, and between all nations, and of the method in which this is carried on, will make it obvious that if all use of negotiable paper were taken away, this commerce would be simply impossible.

It is not difficult to account for the introduction into commerce, at this time, of the use of negotiable paper, and also of insurance. The commerce of Christendom had reached all of its development which was possible without them. At this period there was one of those impulses to greater intensity and enlargement of human activity which appear at distant intervals through all the past. We need only refer to the press, the compass, to the revival of art and literature, to the voyages of discovery which led Columbus to America and Vasco da Gama to India by the Cape of Good Hope, and to the introduction of gunpowder, which has changed the character of war, and with it the relations of nations.

It

more concerns, our present subject, that commerce felt the same impulse; and if, on the one hand, the use of negotiable paper became one of the means of its rapid and great growth, the introduction of marine insurance was another. And it is easy to see how this has always operated, and still operates, to aid and promote extensive commerce.

The fundamental idea of insurance is to divide losses among numbers, so that they may fall with crushing weight on none; and at the same time do this with so little call upon the profits of commerce as to leave unimpaired its power of making men wealthy, and its inducement to men to engage in it for the purpose of becoming wealthy. And it is equally easy to see how it does this. It permits the small capitalist, and even him who begins only with borrowed capital, to engage in enterprises with the certainty of having its profits if it be successful, and without the danger of destruction if it end in disaster. The stimulus thus given to commerce can hardly be over-estimated. And it is also to be remembered, that the man of moderate means who sustains great and total loss without insurance is deprived of the means of business, and is no longer a merchant or sustainer of

commerce.

Thus it is that the commerce of to-day, with the nearly universal practice of insurance, introduces a kind of solidarity among merchants. They become, to a certain extent, liable for each other, and so far protectors of each other. Nor is this true only of those who are neighbors, or who live in the same region of country. The maritime property of any one of our commercial cities is divided to a considerable extent, as to its insurance, among all the cities. And not only so, but American property is insured in England, and English property in this country. And the same thing is true, although to a less extent, of the Continent of Europe.

This subject has been dwelt upon, not merely for whatever interest it may have to the student of history as an historical inquiry, but for its direct and important bearing upon the law of insurance.

If we understand the immense utility of insurance, and the grounds, or, as may well be said, the indispensable conditions of this utility, we shall see that these depend upon a few simple

principles; and we shall also see that merchants in their practice, and courts in their decisions of the multifarious and complicated questions presented by the law of insurance, constantly regard these principles. And it may be added, that if the sagacity of merchants, stimulated by a sense of direct interest, and gradually taught by experience, has discovered these principles and applied them to practice, it is not less true that courts have been too sagacious to disregard this practice. Since the days of Lord Mansfield, who set a wise example in this respect, the jurisprudence of England and America, in the matter of insurance, has done little else than adopt the usage of merchants, and give to it the force of authority.

What are these principles? They are few and easily stated. And indeed they all rest on one principle. It is, that if insurance be made too costly to the insured, and if it be too difficult for them to obtain indemnity for loss by reason of the narrow construction of the law, or the severe application of technical requirements, the practice of insurance would be checked, and it would be left very much to the wealthiest and the most careful merchants, who are those that need it least, and who would be most disposed to use a common phrase-to "stand as their own insurers."

On the other hand, if insurance be too cheap, and, when loss occurs, indemnity is so easily recovered as to put the careless and the careful on the same ground, insurers would find themselves losing too much, or, in other words, losing on the whole; and if the business of insurance were conducted on the credit of funds. appropriated to it, they would fail, and insurance become in fact no insurance. Or, if to meet these expenses and losses, they raised their premiums high enough to cover them, careful and skilful merchants would avoid insurance when the risks they had to pay for were far greater than the actual risks to which their own property was exposed.

The object, therefore, to be attained by merchants and insurers in their usages, and by courts in their construction of the laws of insurance, and in the application of them to cases which come before them, is to find if possible the just medium between these extremes.

The ideal perfection of maritime insurance is easily stated. It

would become actual, if all maritime property were covered by insurance, and the risks of this insurance were widely distributed, and the cost of it were so accurately proportioned to the real danger that the premiums sufficed to pay all the losses, with only a sufficient surplus to pay the expense of the business when economically conducted, and a reasonable interest on the funds on the security whereof the insurance is effected.

This ideal may never be attained and preserved with precise accuracy; but the departures from it oscillate within narrow limits, and, on the whole, the work is sufficiently well done. At one time premiums run a little too high. Then the business is checked. The best ship-owners and merchants decline to pay more than they think the risk is worth, and insurers are obliged to call them back by lowering the rate of premiums. At another time the premiums run too low: in their desire to do much business, and in the competition for business, insurers take risks at less than they are really worth. The consequence soon shows itself. Losses eat up all the premiums, and something more; and insurers find that the more business they do in that way, the worse it is for them. The mischief cures itself at once. As soon as such a state of things is seen to exist, or rather, as soon as it is seen to threaten, insurers raise their premiums; and, with some check to their business perhaps, conduct it on terms which give them a reasonable profit, and afford security to the insured at reasonable cost. And so it goes on. These fluctuations are inevitable. No law could prevent them, nor could it usefully interfere with them. The necessities of business, and the certain consequences of error in either direction, suffice to keep these alternations within narrow bounds; and the business of insurance, in submitting to them, only follows the universal law of all human actions, and indeed of the movements of the world. Everywhere, nothing is perfectly and permanently right; but aberration in one direction is cured and compensated by aberration in another, and the resultant of the whole is near enough to the right to be practically sufficient.

All this grows out of, and depends upon, the great law of average. Insurance of all kinds rests on this foundation more obviously than anything else. But it is a law, or a fact, of vast and wide power. Only of late years has it become the subject of